The Lies of Nouriel Roubini and Gold

On December 15, 2009, when gold was trading at $1122 per troy ounce, Nouriel Roubini stated, "Since gold has no intrinsic value…there are significant risks of a downward correction rather than a rapid rise towards $2,000, as today’s gold bugs claim” and gold “looks suspiciously like a bubble”. A 35% drop after a bubble bursting is a reasonable fall for “bubble” talk, which would have sent gold into the low $700s per ounce. A month earlier, Roubini had declared, “gold at $1,500 is utter nonsense.” So how did gold perform after Roubini hawked his “gold is a bubble” message all over the news? Not only did it never retreat back to $700 after Roubini ranted against gold, but it never retreated back to $800 or even $900, and in fact it soared to above $1,900 an ounce less than two years higher, a 69% surge higher that not only crushed Roubini’s “gold at $1,500 is utter nonsense” declaration, but made Roubini’s prediction of gold’s future price behavior utterly wrong by more than 100%.

After Roubini was so ridiculously wrong and seasoned gold advocates were right back then, one would think Roubini would think twice about opening his mouth again when making predictions about gold. But nope. He’s back at it again, as his only purpose in the media and in the institutional educational system seems to be to serve as a shill for the banking elite. This week Roubini claimed that gold would retreat back below $1,000 once again, just as he did four years ago and the reasons he provides are as illogical now as they were back then, including sophomoric ad hominem attacks against gold bugs that lack any factual support whatsoever. One would think that if the media were to grant someone that made such a horrendously wrong prediction about gold just a few years ago the spotlight again, that they would discuss his past erroneous predictions to provide some context to his present predictions. However, as I explained in this article, “Independent v. Mainstream News: A Choice of Being Informed v. Being Re-Educated”, mainstream media has evolved today to behave as the propaganda division of the fascist corporate banking –government conglomerate. Today, financial journalists employed by mainstream media typically just repeat what they are instructed to tell the world by their employers without any foresight, critical thought or journalistic introspection.

So let’s take a look at Roubini’s arguments for sub-par $1,000 gold. Roubini states six primary reasons “why gold prices are likely to move much lower, toward $1,000 by 2015” even though all six can easily be dismissed as falsehoods simply by looking at the facts and ignoring Roubini’s unsubstantiated rhetoric. So let’s analyze all 6 of his statements:

(1) "Gold prices tend to spike when there are serious economic, financial and geopolitical risks in the global economy."

This statement implies that there are no serious economic financial and geopolitical risks in the global economy, an incredulous statement if one merely looks at the facts and ignores various banker and politician declarations of economic recovery buttressed by falsely compiled economic statistics. Economic growth in India is the lowest in a decade, economic activity in the Eurozone has declined for 6 consecutive quarters, in Greece, Spain, Portugal and Italy, youth unemployment rates vary from 40% to nearly 63%, the May US Manufacturing ISM report was the worst since mid-2009, but yes, according to Roubini, there are no serious economic risks anywhere in the world today.

(2) “Gold performs best when there is a risk of high inflation, as its popularity as a store of value increases. But despite very aggressive monetary policy by many central banks…global inflation is actually low and falling further.”

According to whom? According to the Bureau of Labor, “official” inflation inside the US is only 1.1%. But anyone that actually is concerned with facts and knows that the US government has drastically and aggressively altered the inflation formula to strip away all components of inflation over the past three decades will realize that this statistic is a complete lie. But not Roubini, who believes the 1.1% inflation statistic is accurate and truthful. It’s downright scary that he is molding impressionable young minds at NYU. But then again, Roubini is just fulfilling the Rockefeller funded General Education Board’s mission in the 1900s of having young students “yield themselves with perfect docility to our molding hands.”

(3) "Unlike other assets, gold does not provide any income."

Gold since 2001 has risen more than 460%. Obviously with this type of enormous appreciation against the USD and similar appreciation against all global fiat currencies, there has been more than ample opportunity for profit taking and gains to be taken along this journey if one desired. Again, an anti-gold argument that has zero merit if you are a logical person capable of independent thought.

(4) "Gold prices rose sharply when real (inflation-adjusted) interest rates became increasingly negative after successive rounds of quantitative easing. The time to buy gold is when the real returns on cash and bonds are negative and falling."

As of May 31, 2013, 5 year treasuries, constant maturities, were yielding 1.05%; 10 year treasuries 2.16%. Shadowstats.com, which complies inflation statistics as they were compiled in 1980 before the government systematically altered the inflation formula to strip out components of inflation from the price index, states that current inflation in the US is about 8.5%. That means for a 10-year investment in US Treasury bonds, you presently have a very substantial real negative rate of return.

(5) "Some argued that highly indebted sovereigns would push investors into gold as government bonds became more risky. But the opposite is happening now. Many of these highly indebted governments have large stocks of gold, which they may decide to dump to reduce their debts. Indeed, a report that Cyprus might sell a small fraction – some €400m – of its gold reserves triggered a 13% fall in gold prices in April."

(6) "Some extreme political conservatives, especially in the United States, hyped gold in ways that ended up being counterproductive. For this far-right fringe, gold is the only hedge against the risk posed by the government's conspiracy to expropriate private wealth. These fanatics also believe that a return to the gold standard is inevitable as hyperinflation ensues from central banks' "debasement" of paper money. But, given the absence of any conspiracy, falling inflation and the inability to use gold as a currency, such arguments cannot be sustained."

Here, Roubini transitions from full propaganda mode into full shameless ad-hominem attack-mode. Note his very careful and deliberate selection of words: "extreme", “far-right fringe”, “conspiracy”, and “fanatics”, in an attempt to marginalize the truth with zero factual evidence whatsoever. Talk about an unsustainable argument! If the best argument one can come up with is one full of sophmoric name-calling devoid of any factual evidence, then one needs to take a re-fresher course in logic. If Roubini had taken just ten minutes to study the data of physical gold and physical silver sales worldwide during this banker executed paper-raid on gold and silver prices, he would realize that he was labeling nearly the entire Eastern hemisphere of Asians as lunatic fringe conspiracists.

Fully more than half of the economists I read about in the mass media, if they were forced to accurately dress their role, would have to wear a big red foam nose, oversized shoes and some clown face paint, as they serve no other role in this continuing global economic tragedy other than that of a Shakespearean jester who must distract the people from the truth. Because of shills like Roubini, this is why I still claim today, that “Everything I Learned About Succeeding in Business, I Learned Outside of the Institutional Academic System". One would also be wise to avoid mainsteram academic economists and the mainstream financial press to learn the truth about the current state and dynamics of gold and silver markets. (Copyright: 2013 SmartKnowledge Pte Ltd. You may republish the above article only in its entirety and with all links intact, including proper attribution to the author as described below.)

About the Author: JS Kim is the Founder & Managing Director of SmartKnowledgeU, a fiercely independent research & consulting firm that uncovers the best ways to buy gold and silver and focuses on the realities of this current global economic crisis v. the propaganda of the mainstream financial industry.

The paper gold market is very different that the corn or the copper markets. There is a reason this market was developed in the 1980s and a reason it is soon to fail. The explanations are not simple but the punch line is: hold physical gold. If you need more confidence in this position then you'll have to do some more reading. Check out the declining inventory of GLD: http://www.spdrgoldshares.com/assets/dynamic/GLD/GLD_US_archive_EN.csv

It does not decline every day but it has dropped almost 350 tons since January. The question is where is the physical going??

One does not HAVE TO understand what is happening to take advantage of a soon to be dramatically higher POG but it does help with sleeping at night. The more people understand the more they seem compfortable with higher pecentages of physical gold held as wealth assets.

a pro attacks ideas and not people; this kid needs to grow up; where was the manipulation from 98-2010? so sick of kwn perma bulls, turk, von greyerz and so forth; nothing lasts forever; if you have all your net worth tied up in pm, then that is your choice, so be a big boy and live with your choice!

The fully loaded breakeven price of gold for miners is presently $1400 an ounce. Now consider the following:

1. Miners need to make at least some profit. Let's be conservative and say a 5% net margin. That puts the wholesale price at $1470.

2. The people the miners sell to need to make profit at the retail level. Let's again be conservative and say a 5% net margin. That puts the retail price at $1543.50.

So, if you're buying at any point below $1543.50 retail, you're really buying at a discount to "fair value". Note that this ignores growing demand/supply imbalances in the physical market, government largesse, currency debasement, and any other consideration that might factor into a person choosing to invest in gold. You'd actually have to be a complete idiot not to buy physical below that $1543.50 number.

The smell of desperation emanating from all corners of the academic, financial and media outlets in their combined anti gold stance should convince everyone with a modicum of intelligence to plunge the final nail into their coffin and purchase the remaining gold available on the market for sale. In doing so we will unearth the failure of the exchanges and bullion banks to make good on their contracts and thereby default en masse.
Last week i stated soonafter Roubini's treachery on cnbc that not only should this economics teacher be pulled from teaching as his command of spoken english is sadly lacking but he should be hung alongside Soros for his lack of moral integrity. He is one steenking piece of shit.

I had a dream where Soros was trying to escape Italy with a squad of German soldiers and was caught by Partisans near the frontier. He was disguised as an organ grinder. He had a light-skinned monkey with him who had big ears.

They locked him up then shot him the next day and hung him by his heels in Milan off a lamp post. The monkey escaped.

The likes of this "economist" hate gold, because it forces them to be honest. If it took center stage, they couldn't spout off bullshit day and night as they do. The guy can't come out and say, "we are all scumbag liar motherfuckers, and we live to steal from the whole world".

These are companeis with market caps in excess of $30 bln dollars. No income for investors. They're merely hoping these common stock symbols rise in USD value. If these companies go BK, the common stock is worth nothing. Also, the common stock is typically held by a broker (such as TD, IB, etc.), so if the broker (or the sub-brokers they use, such as Knight Capital, MF Global, etc.) gets in trouble, you're also fucked.

Good thing we can at least keep our bank deposits safe, even though they generate nearly zero income. After all, there is a whole $25 bln in FDIC insurance backing $9.6 trillion in deposits. No risk there whatsoever.

He should be removed from his position of professorial charlantanism.....but NYU....a large so-called educational institution that is a stupid, corrupt, barbarous cesspool of Rockefellerine/Rothschilderine deception and disinformation. What a waste and darkening of young human potential.

It can take most of a lifetime to overcome the damage inflicted by such deep and erroneous inculcation. Send your child to such institutions and he/she will emerge as a menace to society.

The purchasing power of money (gold) decreases in proportion to the acceptance of its substitutes (credit, FIATs). This is why gold does well in deflation - during deflation credit is destroyed via defaults, making the money remaining in the system more valuable. It's the reverse of printing money - gold gets anti-diluted when credit is destroyed.

It always cracks me up when these guys use the 'gold has no income' argument, yet they will praise the virtues of house 'equity' and rising home prices as a good thing....yet homes (not talking investment properties) do not produce any income and are actually a liability, but these guys spew out the garbage that a house is an 'asset'.

How many small cap stocks produce income, yet these guys pitch them every chance they get ?

At this time, I think physical gold/silver and mining stocks are the perfect contrarian play and a solid long term play.

#2) Gold actually does have a yield, like any other financial asset! You can sell options on it and collect income in proportion to the risk you are willing to onboard in exchange. So, for example, you could sell call options on paper gold (GLD) or you can sell call options on Comex futures. With the proceeds, you can buy more physical - win/win!

I want to know what the true value of an ounce of gold to a barrel of oil is. I have done my calculations with annual production rates of the two commodities, with and without various fudge factors for 'other' economic activity, but the numbers are so outlandish....

In 1902 an ounce of gold could rent you a two bedrooom apartment. Today ( except in NY ) it still can.

Gold is a "store of value" and to measure it's value in fiat currency is another mistake made to often by those who think short term.

I keep enough gold around to live five years in a nice two bedroom apartment and eat well during those sixty months. If the system has not self corrected in five years , then we will need bullets, not gold. I keep them somewhere else.

I made the same exercise with the first Golf GTI, launched in the seventies, and the price of a baguette. First Golf GTI price was 4918 EUR, which equalled 44.28 ounces of gold. Today, a Golf GTI costs 31 890 EUR, so 29,53 ounces of gold. A baguette was sold 0.15 EUR in 75, at that time an ounce of gold could buy 778.13 baguettes. Today, one ounce buys you around 1080 baguettes. It means that we had an inflation of 600 %, and that gold did better than keeping its purchasing power (at least for those 2 examples). Plus it has been done few days ago, with gold heavily undervalued.

That could be attributable solely to increasing productivity. If you want to isolate the effects of inflation you'd need to figure out how much credit expanded during that time frame. Still, nice to think about!